USD/JPY consolidates in a narrow band around 145.00 mark, eyes NFP for fresh impetus

• USD/JPY struggles to gain any meaningful traction and oscillates in a range on Friday.
• Speculations that Japanese authorities might intervene in the markets cap the upside.
• The underlying USD bullish sentiment acts as a tailwind ahead of the US NFP report.

The USD/JPY pair fails to capitalize on its gains recorded over the past two trading sessions and oscillates in a narrow range through the early European session on Friday. The pair is currently placed around the 145.00 psychological mark and remains at the mercy of the US dollar price dynamics.

Growing acceptance that the Fed will stick to a more aggressive rate hiking cycle to tame inflation continues to act as a tailwind for the greenback and the USD/JPY pair. In fact, the markets have been pricing in another supersized 75 bps Fed rate hike move in November. The bets were reaffirmed by the recent hawkish comments by several Fed officials, reiterating that the US central bank remains committed to bringing inflation under control.

Furthermore, the widening of the US-Japan rate differential is seen weighing on the Japanese yen and offering support to the USD/JPY pair. The prospects for a faster policy tightening by the Fed remain supportive of elevated US Treasury bond yields. In contrast, the Bank of Japan remains committed to keeping JGB yields at low levels. That said, intervention fears hold back bulls from placing fresh bets and capping gains for the major.

Japanese Prime Minister Kishida talked about the weakness in the domestic currency and said that the recent sharp, one-sided yen moves are undesirable. Kishida added that the intervention last month reflected the view that we cannot turn a blind eye to speculative FX moves. This comes after Japan's finance minister Shunichi Suzuki said on Monday that the government stands ready to intervene in markets to prevent deeper losses in JPY.

Market participants also seem reluctant and prefer to move to the sidelines ahead of the crucial US monthly employment details, due for release later during the early North American session. The popularly known NFP report will influence Fed rate hike expectations. This, in turn, will play a key role in determining the near-term trajectory for the buck and provide a fresh directional impetus to the USD/JPY pair.

Technical levels to watch